Formosa Petrochemical shares drop 0.8 percent

Yesterday was the first day Formosa Petrochemical’s shares went ex-dividend, which means the stock exchange automatically reduces the price of the stock by the amount of the cash dividend the company pays its shareholders.

Last month, the company secured shareholders’ approval to issue a cash dividend of NT$0.26, on last year’s earnings of NT$2.72 billion (US$90.6 million), or NT$0.29 per share.

Company shares declined 1.2 percent to NT$74 when trading opened yesterday. They rose to NT$74.9 in the middle of trading, but were still unable to reach Monday’s closing price of NT$75.2.

Dividend stocks tend to get hammered after their ex-dividend dates.

Analysts have said that whether such stocks recover to their prior levels depends on company and market fundamentals.

Although company chairman Chen Bao-lang (陳寶郎) last month said oil demand would rise in the second half of the year as demand in the Middle East, Europe and the US increases, however, analysts have different views.

Formosa Petrochemical is expected to face challenges to revenue and earnings in the second half of the year, when the exit of US Federal Reserve’s quantitative easing might drag down crude oil prices, Capital Securities Corp (群益證券) said in a report on June 25.

The company is forecast to post a net profit of NT$25.25 billion, or NT$2.65 per share, this year, eight times as much as the NT$2.72 billion, or NT$0.29 per share, it posted a year ago, Capital Securities said.